Business Directories

GCC hospitality industry outlook 'positive'

Manama, April 13, 2011

The outlook for the GCC hospitality industry remains positive, according to a new report from Alpen Capital, a leading Bahrain-based provider of corporate advisory services.

“Our report studies the Hospitality sector in the GCC with a focus on the hotel industry room availability and room revenues, its growth, performance and outlook for next few years,” stated Sameena Ahmad, managing director at Alpen Capital.

“Our outlook for the hospitality industry remains positive as the industry bears a strong correlation with the healthy GDP growth projected for the region and there are several strong growth drivers for the industry.”

“The GCC hospitality industry has several investment merits as the travel and tourism industry is slowly grabbing the attention of potential investors,” added Sanjay Vig, managing director at Alpen Capital.

“The growth in the sector is catalysed by several government initiatives in infrastructure projects, bids for global sports events, commitment to diversifying the economy and initiative to stimulate the private sector.”

Alpen Capital’s latest report on the GCC Hospitality Industry estimates that room revenues for the GCC hotel industry for the years 2012, and 2015 will stand at approximately $22 billion and $27 billion respectively growing at a rate of 11 per cent from 2010. Saudi Arabia and UAE are the two biggest markets in the region with 89 per cent share jointly.

In the report, Alpen Capital also projects optimistic and pessimistic scenarios for the room revenues based on different levels of room supply and tourist arrivals.

The report estimates that the GCC Hospitality Industry performance as measured by annualised Revenue Per Available room (RevPAR) will stabilise at around $173 during 2012 to 2015. Average Daily rate (ADR) for the region will firm up to $257, while occupancy rates will be around 67 per cent for the same period. It is important to note that ADR and RevPAR in GCC are highest amongst global sub-regions.

The GCC Hospitality industry is currently trading at a P/E of 15x average which makes it very attractive in comparison to its global peers.

Alpen Capital has projected the outlook of the GCC Hospitality Industry based on supply and demand side factors. The supply side factors include, the total number of rooms expected to be added in the next four to five years and those under development.

In terms of hotel rooms supply pipeline, Saudi Arabia leads the way with 61 per cent of the pipeline, followed by UAE with 29 per cent. However in terms of rooms under construction UAE leads with 62 per cent as of 2010 followed by Saudi Arabia at 16 per cent. The demand estimate is based on forecasts of increase in tourist arrivals and leisure & business spending for international and regional visitors.

There are several factors boosting the outlook of the GCC hospitality industry. The GCC region has had continued economic growth and a healthy GDP projected for the future from which the hospitality industry will benefit. The region has a strategic location making it attractive to tourists from UK, Europe and the GCC itself. The theme/experience based offering in the GCC region will help in capturing the spending power of the high end segment of the “baby boomer” generation in the US and Europe.

The expansion of the middle class of China and India is also expected to present exceptional opportunities for growth for the GCC Hospitality sector. The increase in business travel within the GCC region will also help in boosting regional demand.

The growing importance of sports tourism with many sporting events such as the Dubai Desert Classic, Formula 1 Grand Prix being hosted in the region as well as Qatar winning the bid to host the 2022 World Cup will have a positive impact on the industry.

Events based tourism as well as niche tourism offerings such as cultural & heritage tourism, and diving and wild-life oriented tourism will also help in promoting the industry. The GCC governments are very supportive of their free trade and encourage foreign direct investment (FDI) and globalization. The increase in investment in the aviation sectors by the GCC countries in order to become a global hub for passengers and cargo with an aim to link various growth markets is also a promising factor.

One of the main factors impacting the industry is the wave of political unrest and uncertainty across parts of the GCC region as well as the larger Mena region, which may negatively impact tourist arrivals. Several other factors such as oversupply of hotel rooms, high employee turnover, rising cost of construction as well as availability of project financing are some of the other challenges for the industry.

Despite these factors, the outlook for the GCC Hospitality industry remains positive for 2011 – 2015 due to the strong growth drivers, the report concluded.-TradeArabia News Service